THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

WOLF BLITZER, CNN ANCHOR: It's 5:00 p.m. here in Washington, and you're in THE SITUATION ROOM, where news and information from around the world arrive in one place at the same time. Happening now, there's breaking news to report. Clemency for a death row inmate just granted in the last few minutes, only hours before what would have been a landmark execution.

Also happening now, it's 1::00 a.m. Wednesday in Iraq, where four Christian aid workers are missing. Now a new videotape appears to show them being held hostage. And there's a puzzling claim of responsibility.

It's 5:00 p.m. in northern Virginia, where an American citizen awaits sentencing on terror charges, including plotting to assassinate the president of the United States. Now, for the first time, we're seeing his chilling and controversial confession.

It's 4:00 p.m. in New Orleans. People there are venting their anger at the pace of recovery a full three months after Katrina.

And the record-setting hurricane season just keeps on going. There's another tropical storm, believe it or not, in the Atlantic brewing right now.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

We're beginning with the breaking news story out of Virginia. If you're just joining us, the governor, Mark Warner, has just commuted a death sentence.

The formerly condemned man was only hours away from death. He would have been the 1,000th person executed since the death penalty was reinstated back in 1976.

Our national correspondent Bob Franken is joining us now live to fill in the details -- Bob.

BOB FRANKEN, CNN NATIONAL CORRESPONDENT: Well, Wolf, there was a significant glitch, if I can use that word, in the proceedings against Robin Lovitt. He had been convicted in 1998, charged with a murder in a pool hall in Arlington, Virginia, not far from here. But DNA evidence which his lawyers said would possibly established his innocence, DNA evidence contrary to procedures had been thrown out by a clerk of that court.

Now, the governor of the state, Mark Warner, somebody who, by the way, is considered a prospective presidential candidate, who has never commuted a death sentence during his term in office, decided to commute this one, saying in a statement, "The commonwealth must ensure that every time the ultimate sanction is carried out it is done fairly." And since Mark Warner had been convinced by, among others, Ken Starr, the attorney, it could not be done, he commuted the sentence to life in prison without parole -- Wolf.

BLITZER: Does Robin Lovitt, this 42 year-old man, does he have any other legal standings to try and reopen the case or do something to try to get that sentence, life in prison without parole, reduced even more?

FRANKEN: That is still being argued. There are some discrepancies apparently in testimony, some people who have recanted their testimony.

Obviously the DNA evidence would have been vital. But now that has been tossed away. It will be interesting to see what route that the appellate lawyers, including Ken Starr, take from this point on.

BLITZER: All right. Thanks very much.

Bob Franken reporting that for us.

Let's move on to another big story we're following right now, Iraq. They've been missing since the weekend, now there's new video out apparently showing four aid workers for a Christian relief group kidnapped in Iraq. Among them, one American and two Canadians.

CNN's Aneesh Raman has the latest from Baghdad.

(BEGIN VIDEOTAPE)

ANEESH RAMAN, CNN CORRESPONDENT: Wolf, video released today showing the four kidnapped Western aid workers, the video first shown on Arabic language news channel Al-Jazeera, then put on an extremist Web site. The video shows the four aid workers seated as militants points guns to their heads.

We know the nationalities of these aid workers. One of them is American, another a British national. The other two are Canadians.

They're all part of a group called Christian Peacekeepers Team, a group that's been in Iraq since October 2002. These four aid workers were kidnapped in the capital on Saturday. The group that has them, a previously unknown insurgent group, calling itself Swords of Justice.

Now, also today, Germany's chancellor announcing that a German woman and her driver have been kidnapped. They've been missing in Iraq since Friday.

The kidnapping of Westerners is something we saw frequently in 2004, into the early part of 2005. It has gone down, the number of those kidnappings, as Western organizations have left the country or beefed up their security. It's unknown what security these aid workers and the German national had with them here in Iraq -- Wolf.

(END VIDEOTAPE)

BLITZER: Aneesh Raman reporting for us. Aneesh, thank you very much.

Meanwhile, questions about when U.S. troops might start coming home from Iraq are getting louder. The Bush administration insists it depends on the readiness of the Iraqi forces, but that's the subject of hot debate.

Our senior Pentagon correspondent, Jamie McIntyre, is standing by over at the Pentagon. He's got more on this story -- Jamie.

JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT: Well, Wolf, here at the Pentagon they call it a victory strategy, not an exit strategy. But whatever you call it, it hinges on Iraqi troops who are increasingly being abused of abuse and worse.

(BEGIN VIDEOTAPE)

MCINTYRE (voice over): The Pentagon is brushing aside the growing number of allegations from Sunni Iraqis that mostly Shia security forces are abducting and sometimes torturing and executing civilians from Sunni neighborhoods.

(on camera): To what extent do you think that's an indicator that the Iraqi military, Iraqi security forces, are not yet ready to assume control of the country?

DONALD RUMSFELD, SECRETARY OF DEFENSE: Oh, I don't think it is. I mean, you're going to have allegations back and forth.

MCINTYRE (voice over): Rumsfeld insists he simply doesn't know if the recent charges constitute a widespread problem within the Iraqi military, which is increasingly taking responsibility for both security and counterinsurgency operations. But the accounts of killings come as the Iraqi government is already investigating alleged prisoner abuse of mostly Sunni inmates at a secret bunker found at the Interior Ministry in Baghdad earlier this month.

Rumsfeld called any instance of inhumane treatment worrisome but disagreed publicly with his top general about the U.S. military's responsibility to intervene in the actions of Iraq's sovereign government.

GEN. PETER PACE, CHAIRMAN, JOINT CHIEFS OF STAFF: It is the absolute responsibility of every U.S. service member if they see inhumane treatment being conducted to intervene, to stop it.

RUMSFELD: I don't think you mean they have an obligation to physically stop it. It's to report it.

PACE : If they are physically present when inhumane treatment is taking place, they have an obligation to try to stop it.

(END VIDEOTAPE)

MCINTYRE: Rumsfeld argues that the international community and pressure from it will keep Iraq on the straight and narrow. But just this week, one of the leaders of Iraq's leading parties told "The Washington Post" that the U.S. needs to let the Iraqi military get tougher with insurgents in order to defeat them -- Wolf.

BLITZER: A quick question, Jamie. Does the Pentagon break down the Iraqi security, the military forces, the police forces into those who are legitimately part of a national army, if you will, as opposed to those who are part of some Kurdish militia or Shiite militia, like the Badr (ph) militia, the -- that's been going on? Do they break it down between the national army and these various ethnic militias that are running around the country?

MCINTYRE: Well, no, the short answer is they don't break it down. They do acknowledge that these militias exist within the Iraqi military. To the extent they can, they're trying to break them down.

They don't allow, for instance, people to join as a militia. But they recognize they do exist within. And part of the training and professionalization of the Iraqi military is to try to get the militias out and bring them under one central authority.

Let's go back to New York. Jack Cafferty standing by with "The Cafferty File."

This story on Iraq, Jack, it's very, very murky, the whole nature of these militias being part of the Iraqi military and what they may or may not be up to right now.

JACK CAFFERTY, CNN ANCHOR: I thoughts it was interesting, too, watching the secretary of defense stand there and try to correct the general who was laying out the guidelines for his troops in the event that they...

BLITZER: That was pretty amazing when you think about it.

CAFFERTY: I mean, it's like, you know -- what is it, Emily Post, the book about manners? You don't do that kind of thing.

Anyway, we're going to read some names here. I want you to guess who their lawyer was: cult leader David leader David Koresh; Sheikh Omar Abdel-Rahman, the man behind the first World Trade Center attacks; former Nazi concentration camp boss Karl Linnas; Rwandan genocide leader Eliza Fond (ph) and Tacharutamana (ph) -- I should get extra money for saying that -- the PLO leader sued by the family of Leon Klinghoffer, a wheelchair-bound man who was killed by terrorists aboard the hijacked cruise ship Achille Lauro; Yugoslav dictator Slobodan Milosevic. Have you figured it out yet? The latest client of this particular attorney is Saddam Hussein, and the answer is former U.S. attorney general Ramsey Clark.

Clark said today that he met with his client yesterday and that Saddam was in "extremely good spirits." I feel better knowing that.

However, Saddam's trial is not about some Western mouthpiece going to Baghdad in order to get his picture in the newspaper. It's about a panel of Iraqi judges trying a fellow Iraqi dictator for war crimes committed against his own people.

So here is the question: Should Ramsey Clark find something else to do? Another line of work, perhaps?

Caffertyfile@CNN.com is the e-mail address, and you can drop us a note.

BLITZER: A lot of our younger viewers, Jack, probably don't remember that Ramsey Clark was the attorney general of the United States under L.B.J., and he's the son of a U.S. Supreme Court justice, just to give you some perspective.

CAFFERTY: Yes. That was back before he went crazy.

BLITZER: All right. We're going to continue to watch this for all of us.

Thanks, Jack, very much.

Up ahead, a stunning confession. An American citizen admits a terror plot against the United States and an assassination plot against the president. But was he tortured into confessing?

And a CNN exclusive. The prime minister of France offering advice on what the United States should do in the Iraq war. We'll tell you what Dominique de Villepin told our Christiane Amanpour. Stay with us for that.

And also, on the war, when can U.S. troops come home? I'll ask Connecticut's Democratic senator, Joe Lieberman. He's just back from Iraq and has some strong views.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: For the first time, we're getting a look at the confession of an American citizen convicted of aiding al Qaeda and plotting to assassinate President Bush. The controversial videotape was central to his trial, but his lawyers say it was the product of torture.

CNN National Security Correspondent David Ensor reports.

(BEGIN VIDEOTAPE) DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT (voice over): On the tape made in Saudi Arabia in the summer of 2003 and played at his trial, Ahmed Abu Ali admits to plotting terrorism against the United States, where he was born and where he grew up in suburban Washington.

"I immediately accept it," he says, "because of my hatred of the U.S. for what I felt was its support of Israel against the Palestinian people."

Abu Ali says he discussed with others how best to assassinate President George Bush.

"I and Ali agreed to either use three snipers who would file simultaneously to increase the hit probability, or to carry out a martyr operation when the U.S. president goes out to greet the people."

On the tape, Abu Ali yawns repeatedly. He was exhausted, say his lawyers. They say the false confession was made after torture, beatings that left him unable to sleep on his back.

KHURRUM WAHID, AHMED ABU ALI'S ATTORNEY: I think he would have -- he would have said he was a girl if they asked him do. He would have said he was a monkey. I mean, the man was subjected to the kind of power, dominance, controlled environment that you see in domestic violence cases here every day.

ENSOR: But jurors who also saw Abu Ali pretend to lock and load a gun and then laugh apparently found more compelling prosecution arguments that the young man was relaxed on the tape.

PAUL MCNULTY, U.S. ATTORNEY: The videotape reveals a person at ease, a person who was speaking freely and did not appear to be under any duress in any way.

ENSOR (on camera): Abu Ali faces a sentence of 20 years to life. His lawyers plan to appeal.

David Ensor, CNN, Washington.

(END VIDEOTAPE)

BLITZER: Abu Ali was born in Texas, grew up in Falls Church, Virginia. That's less than a dozen miles from where he was convicted last week.

Holiday shoppers aren't the only ones out in force in stores in the Miami area. Police are now making a show of force with terrorism in mind.

Our homeland security correspondent, Jeanne Meserve, is standing by with the story -- Jeanne.

JEANNE MESERVE, CNN CORRESPONDENT: Wolf, one of the objects of this new operation is to educate the public about terrorism. But the other target audience is the terrorists themselves.

(BEGIN VIDEOTAPE)

MESERVE (voice over): Miami police will be showing up in force at key locations in the city, part of an operation called Miami Shield.

DEP. CHIEF FRANK FERNANDEZ, MIAMI POLICE: This is an in-your- face type of strategy, letting these terrorists know that we're out there.

MESERVE: The tactic of displaying force at random times and locations has been used by New York and other cities. The intent is to disrupt terrorist surveillance and planning.

CHIEF JOHN TIMONEY, MIAMI POLICE: Ideally, you would have a police officer at every strategic location 24/7. It's impossible. You couldn't sustain that in the long term. And so what this is meant to do is kind of keep the pressure up by surprise visits to vulnerable locations throughout the city.

MESERVE: No one we've talked to think these unpredictable shows of force are a bad idea. Miami is doing it with existing manpower at no additional cost. But some experts believe the principal effect is to persuade the public that its police department is proactive, while the deterrent effect is basically unknowable.

RICHARD FALKENRATH, CNN SECURITY ANALYST: No, you never know about the dog that doesn't bark. But it is something different they can do. And on the margin it might make just a little bit of difference.

(END VIDEOTAPE)

MESERVE: Miami's police chief says although Miami has been mentioned often as a potential target, there is no specific intelligence that it is in terrorist crosshairs right now. Some experts say without that kind of intelligence an operation like Miami Shield is little more than a stab in the dark -- Wolf.

BLITZER: All right, Jeanne. Thank you very much.

Jeanne Meserve reporting.

Coming up, France's prime minister has been highly critical of the United States policy before the Iraq war. Now the prime minister is offering his assessment of how the war is going and how the United States might proceed. It's a CNN exclusive, the interview with Christiane Amanpour.

And they're serious charges that have been -- not been confirmed, allegations the CIA is running secret prisons in Europe. If it's true, what kind of punishment might members of the European Union face for being involved?

You're in THE SITUATION ROOM. (COMMERCIAL BREAK)

BLITZER: At a time when a number of top Republicans face legal and ethical problems, President Bush is taking a tough line, at least against one of them. Listen to what he had to say about ex U.S. Congressman Randy "Duke" Cunningham, who admitted to taking $2.4 million in bribes.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The idea of a congressman taking money is outrageous. And Congressman Cunningham is going to realize that he has broken the law and is going to pay a serious price, which he should.

(END VIDEO CLIP)

BLITZER: The president and his party are dealing with several controversies at once that could have an impact on the 2006 elections.

Let's bring in our senior analyst, Jeff Greenfield.

You're looking at this, Jeff. Give us some thoughts what this means politically in the coming year.

JEFF GREENFIELD, CNN SR. ANALYST: Well, I think this is -- this is the dilemma: you can have a country headed in the wrong direction, and still voters might support the incumbent party, as they did in 2004, because they thought they trusted the president more on security, they thought John Kerry was too big a risk. And you can -- you can have a party that is prosecuting an unpopular war, where the other party is divided on what to do about it, which is exactly where the Democrat Party is.

You're going to be talking with Senator Lieberman in a few minutes. He more or less endorsed if not every part of the war, he certainly says we're making progress in "The Wall Street Journal" today. That's an opinion at sharp variance with a lot of grassroots antiwar Democrats.

But when you get an issue like corruption, the reason -- and it seems to be focused, for the moment, at least, on one party, the governing party, the Republican Party -- that -- that can trump all these other possible mitigating factors for the Republicans. Why? First, because it's understandable. Taking money is not nearly as complicated an issue as what do you do about Iraq.

And the second thing we're seeing, I think, is it's demoralizing the base. The conservatives who wanted to take the government over 10 years ago from the Democrats, because in part they thought the Democrats had become arrogant and corrupt -- remember the post office scandal, the House banking scandal, various things like that.

If corruption begins to be the defining story over the next several months, it's not just a matter of Democrats energized. It's Republicans who may not turn out as much, may not lick those envelopes, ring door bells, make telephone calls. And that's why it's potentially so -- so damaging an issue, I think, for the Republicans

BLITZER: Potentially not only this, but Iraq hovering over this as well. Double -- a double potential whammy, briefly, Jeff.

GREENFIELD: Yes. I think the key here is you can almost see the Republicans surviving an unpopular war, as I said, because the other party may be sending mixed messages about what to do. But corruption is very simple, everybody gets the idea. And particularly with this Jack Abramoff scandal, which has tentacles that could reach, potentially, at least, as high up into former House majority leader Tom DeLay, that could be a real problem if this -- if this survives into next year -- Wolf.

BLITZER: And DeLay already under indictment for other problems.

Jeff, thank you very much.

Even if you don't drive, we all wind up paying for higher gas prices. It's true for big businesses, but especially true for small businesses.

CNN's Ali Velshi, our Ali Velshi, is standing by with more on that in New York -- Ali.

ALI VELSHI, CNN CORRESPONDENT: Hey, Wolf.

You know, a lot of people call high gas prices or high energy prices the tax on the consumer. Well, that tax seems to be coming down. Take a look at what AAA says the average price of a gallon of self-serve gas was across the country, $2.15 roughly, compared to a year ago, $1.94.

That's not much of a spread. There's parts of the country where we're seeing gas under $2 for a gallon.

Now, what this means is, if you're a small business, particularly one who's been involved in logistics or delivery, you may have had to increase the price of deliveries or add surcharges for your clients in recent months. We've been looking at some advice to small businesses where they say give that back, give it as a Christmas treat or a holiday street to your clients. Draw their attention to the fact that prices are lower now and that you're letting that surcharge go.

For companies that have had to add on the price of the extra gasoline and pass that on to the consumer, if you're a small business, the way you can take advantage of this now before the holiday season -- people are feeling good about it, people have a little more to spend -- let them spend it at your small business -- Wolf.

BLITZER: All right, Ali. Good advice. Thanks very much.

And to our viewers, where can you go to find the lowest gas prices in your neighborhood? Our Internet reporter, Abbi Tatton, has the answer -- Abbi.

ABBI TATTON, CNN INTERNET REPORTER: Wolf, I wanted to bring you this relatively new site here, mapgasprices.com. This is started by two brothers in Utah who are trying to bring you the tools to find the lowest gas prices in your neighborhood.

What you can do is go to your hometown. We punched in Lawrence, Kansas, here and searched for the cheapest prices. And you can find some fluctuations there just a few blocks away.

Now, this site relies on a data service to bring them updates of all those changing prices, but it's also interactive. You can go on and submit those low prices or high prices in your neighborhood. And we did this today.

One of our co-workers reporting prices in Richmond, adding these to the site. So it's fully interactive. They're saying that they're relying on the honesty of people to submit correct prices, but they also have controls in place so you can't offer some outlandish sum -- Wolf.

BLITZER: All right, Abbi. Thanks very much.

Amazing what's going on on the Web right now.

Coming up, the European Union takes a stand on rumors of secret terrorist interrogation sites. The EU says if someone is collaborating with the CIA there will be hell to pay. We'll tell you what's going on.

Also, France's prime minister sounding off about the war in Iraq in a rare in-depth conversation with our Christiane Amanpour.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: They are serious questions, and they're being debated and examined around the world. Is the CIA running a secret network of prisons in Europe? And were European airfields used to transport terror suspects? Officials in Europe suggest if any of that is true, members of the European Union could face punishment.

CNN's European political editor, Robin Oakley, is standing by in London with more on this story -- Robin.

ROBIN OAKLEY, CNN EUROPEAN POLITICAL EDITOR: Well, Wolf, European leaders have been sharply and openly critical of the abuse that went on in the Abu Ghraib jail and over the holding of terrorist suspects at Guantanamo Bay without trial. But now they're having to face allegations about things that have been going on in their own backyard.

(BEGIN VIDEOTAPE)

OAKLEY (voice-over): Now Europeans are in a tizzy about whether some of their own have connived with the CIA in the maintenance of secret jails, at which al Qaeda suspects have been held and intensively interrogated after covert flights using European airfields.

Following claims by "The Washington Post" that the CIA had been interrogating suspects at a Soviet-era compound in Eastern Europe, Human Rights Watch said it had information suggesting Poland, an E.U. member already, and Rumania, an E.U. aspirant, had secret prison sites.

The secretary general of 45-nation Council of Europe, the continent's leading watchdog on human rights, says he's checked out those claims.

TERRY DAVIS, COUNCIL OF EUROPE SECRETARY GENERAL: It started with two countries, Poland and Rumania. So, I contacted those governments. And they gave me categoric assurances, with no reservations or qualifications, that there were no secret prisons anywhere on their territory.

OAKLEY: But, just in case, he's conducting an investigation with all 45 members.

Meanwhile, the European Union's justice commissioner is warning that, if any of its 25 partners have indulged in such breaches of human rights, they could face suspension from the E.U.

FRANCO FRATTINI, EUROPEAN UNION JUSTICE AND HOME AFFAIRS COMMISSIONER: If these allegations were to -- there would have been a very serious, a very grave violation of European treaty, leading to very important political sanctions against member states or candidate countries.

(END VIDEOTAPE)

OAKLEY: Suspicions are growing in Europe. Facts are pretty scarce, but, clearly, tensions are growing, once again, between the what the U.S. calls its war on terrorism, and the much more legalistic approach of Europeans -- Wolf.

BLITZER: Robin Oakley in London for us -- Robin, thank you very much.

Meanwhile, the prime minister of France was, as we all remember, very critical of the United States in the run-up to the Iraq war. Now the prime minister, Dominique de Villepin, is offering his assessment of the war's progress.

The prime minister says, going to war was easy. Leaving Iraq is difficult.

He spoke with CNN's chief international correspondent, Christiane Amanpour, in a CNN exclusive.

(BEGIN VIDEOTAPE)

CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: France, and you, yourself, when you were foreign minister, was very vocal about the Iraq war. You, obviously, did not support it. And you raised many of the issues that are currently unfolding there right now.

What do you think? Do you feel vindicated when you look at what Iraq is going through right now?

DOMINIQUE DE VILLEPIN, FRENCH PRIME MINISTER: No, I think it is, of course, a very difficult situation. We have gone a long way to begin to establish democracy in Iraq. But, still, there is a long way to go.

And I think that the effort should be very important, in terms of including all the political forces.

After the referendum on the constitution, we are going to have general elections in Iraq on the 15th of December. And I think it is a very important moment, in order to try to keep together all the political and social forces of the country.

We know that there are two risks in Iraq still today. One is the division of Iraq, which is, of course, a nightmare for the region. And the second one is a growing role of terrorism.

So, I think it's very important for the international community to -- to try really to -- to put all these forces together to solve the matter. And I think that we should support the initiatives of the Arab League, try to support all -- a better (INAUDIBLE) coalition of the different political forces, and also make sure that all the countries of the region do work together in order to go forward.

AMANPOUR: But you can see that there's a huge amount of difficulty with that.

DE VILLEPIN: We knew since the beginning that it was very easy to go to war, but very difficult to get out of Iraq, because of the fragility of the country, because of the sensitivity of the situation in this region.

So, now we have to face the situation as it is. And it is the responsibility of all the international community to help the process and to make sure that we go forward all together.

AMANPOUR: Do you believe the United States should set a timetable for the withdrawal of its troops?

DE VILLEPIN: I believe that anything should be done, coordinated with the local situation in Iraq and the regional situation.

I think that the timetable should be a global timetable. The timetable -- the real timetable is the Iraqi situation. We should avoid at all costs the (INAUDIBLE) in Iraq, which, of course, will be disaster for the whole region.

(END VIDEOTAPE)

BLITZER: Tomorrow, the president is to launch yet another series of speeches on Iraq. The president hopes to shore up public support for the war. Today, the president visited Denver. During an exchange with reporters, he spoke about current and future troop levels and a possible troop withdrawal. Listen to this.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We will make decisions about troop levels based upon the capacity of the Iraqis to take the fight to the enemy.

And I will make decisions on the level of troops, based upon the recommendations by the commanders on the ground. If they tell me we need more troops, we'll provide more troops. If they tell me we've got a sufficient level of troop, that will be the level of troops. If they tell me that the Iraqis are ready to take more and more responsibility and that we'll be able to bring some Americans home, I will do that.

(END VIDEO CLIP)

BLITZER: My next guest is just back from another visit to Iraq. Democratic Senator Joe Lieberman says failure in Iraq would be, in his words -- quote -- "catastrophic" for the United States and the entire Middle East.

Senator Lieberman is joining us now, live from Capitol Hill.

Welcome back from Iraq, Senator. Good to have you...

SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: Thank you, Wolf.

(CROSSTALK)

BLITZER: ... back safe and sound.

LIEBERMAN: Good to be with you. Thank you.

BLITZER: While you were gone -- or at least in recent days -- we heard from your Democratic colleague John Murtha of Pennsylvania -- very close to the military, the ranking Democrat on the Defense Appropriations Subcommittee -- saying this. Listen to this.

(BEGIN VIDEO CLIP)

REP. JOHN MURTHA (D), PENNSYLVANIA: Just because the president, just because the White House says there's going to be more terrorism if we -- if we withdraw doesn't make it so. He said there was going to be weapons of mass destruction. They said oil was going to pay for it. They said there was an al Qaeda connection. That's not necessarily true.

I predict the opposite. I think there will be less terrorism. We have become the target. We're the ones that have become the enemy.

(END VIDEO CLIP)

BLITZER: You wrote a strong piece in "The Wall Street Journal" today, totally rejecting that argument.

You -- you're basically very upbeat, based on what you saw in Iraq, and a lot of your fellow Democrats are probably scratching their heads, wondering how come.

LIEBERMAN: Well, it's based on what I saw.

I mean, Wolf, there's -- there's no -- I'm not hiding the fact that I supported the war to overthrow Saddam Hussein. I believe mistakes were made after that overthrow, some of them big, by the U.S., but that we have worked our way forward to a policy that is working.

Most significantly is the remarkable political transformation going on in Iraq. They've gone from a murdering dictator, Saddam, now to two elections, and another coming up, in which millions of Iraqis have come out and said: "We don't want these terrorists. We want to govern ourselves."

And I think we have an obligation now to protect that. And the way to do it is to -- to prepare the Iraqi military to take over the -- the defense of the country. And even that's happening.

So, I -- I can only report what I saw. The -- the political -- there's a great campaign going on. There are independent media covering it -- economy getting better, two-thirds of the country, north and south, almost totally without terrorist incidents. The Sunni Triangle is the one hardest-hit. And if we...

BLITZER: But that's where most of the people live, though. That's the bulk of the population.

LIEBERMAN: It's not the majority. But, clearly, Baghdad is the biggest city. I believe it has about seven million of the -- of the 27 million.

But, even in the Sunni Triangle, this new strategy of ours to embed a -- a small group of American soldiers into each Iraqi battalion is working.

BLITZER: All right.

LIEBERMAN: We're jointly clearing some of those cities of the terrorists.

BLITZER: You know...

LIEBERMAN: And then the Iraqis themselves are holding them.

BLITZER: ... you're upbeat. You're optimistic based on what you saw.

Let me read to you what the former interim prime minister, Iyad Allawi, said in "The Observer" in London over the weekend.

He said: "People are doing the same as in Saddam's time and worse. It is an appropriate comparison. People are remembering the days of Saddam. These were the precise reasons that we fought Saddam. And now we are seeing the same things."

Strong words from him, followed up by a front-page story in "The New York Times" today saying there -- and -- and I'll read to you -- he said -- it says: "Hundreds of accounts of killings and abductions have emerged in recent weeks -- most of them brought forward by Sunni civilians, who claim that their relatives have been taken away by Iraqi men in uniform without warrant or explanation."

LIEBERMAN: Yes.

BLITZER: The argument being that these Shiite militia groups, now part of the government, the Kurdish militia groups, they're running independently, and they're really scaring these Iraqi Sunnis with whom everyone wants for -- to engage.

LIEBERMAN: Yes. I saw those stories, Wolf.

Those are, obviously, totally unacceptable. And I want to make clear that I'm reporting progress that I saw in Iraq, not perfection. And, in fact, that's why we have to stay there and could only draw down our troops as the Iraqi military is prepared to secure the country.

In fact, what you're describing is two things. One is that it -- it is exactly what the terrorists want. The terrorists are blowing themselves up in Shia mosques to try to infuriate the Shia -- Shia Muslims -- so they will strike back.

And, unfortunately, human nature being what it is, some of that is -- is happening. But this is the -- a -- a small picture of what the future will be like in Iraq, which is civil war, if we don't stay there and sustain the tremendous growth of an Iraqi self-government, and continue the progress of the Iraqi military to protect themselves.

It's happening. The U.S. commander, George Casey, General George Casey, said to me that probably about a third of Iraqi military security force of about 100,000 can lead the fight on their own, and they hope that that number will double next year.

BLITZER: All right.

LIEBERMAN: If it does, we can begin to draw down some troops. Maybe that's what we'll hear from the president tomorrow.

BLITZER: We're almost out of time, Senator, but a quick question -- you support the administration when it comes to Iraq. What about the president's policy on immigration and security of -- at the borders?

LIEBERMAN: Well, I think we all agree on greater security at the border. But I don't think that the president has the right idea on immigration.

I mean, he will require the 11 million immigrants who are here illegally now -- about 97 percent of the men are working full-time year-round jobs -- to go back to their countries of origin to be legal. I -- that that won't work. They won't come out of the shadows.

I support the bipartisan McCain-Kennedy proposal, which asks the illegal immigrants to pay a fine. But, if they have paid their taxes, they haven't been in trouble with the law, they can become legal citizens and -- and contribute to our country, the way they seem to want to.

BLITZER: Joe Lieberman, always sticking out his own independent positions, not necessarily always predictable, thanks very much for joining us.

LIEBERMAN: Thank you, Wolf. Good to be with you.

BLITZER: And we're glad you're back, as I said, safe and sound from Iraq.

Lou Dobbs getting ready for his program. That starts at the top of the hour.

Lou, what are you working on?

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Well, Wolf, we're working on a great deal. Thank you. And it's good to have recovered from that debate you had me in last night on your broadcast.

Tonight, here, the Bush administration is in search of an Iraqi exit strategy. Tonight, we will be reporting why the president's speech tomorrow could set the stage for a significant withdrawal of our troops next year -- also tonight, an outstanding comment from Defense Secretary Donald Rumsfeld on our nation's border crisis. We will have that for you.

And then I will be joined by Congressman Curt Weldon. He will be our special guest to tell us the latest on his Able Danger probe.

And we will have a special report on our nation's out-of-control political correctness. Merry Christmas, and a simple right to say it and even enjoy it is once again under fire this holiday season.

We will hope you will join us here at the top of the hour on CNN -- now back to you, Wolf.

BLITZER: All right.

Well, it was a great debate yesterday you had with Jorge Ramos. We got flooded with e-mail.

(CROSSTALK)

BLITZER: Lou, you held your position, as you know and as our viewers know, very well.

DOBBS: Thank you, kind sir. Appreciate it. BLITZER: And we will have you back to debate maybe Christmas trees and things like that.

(LAUGHTER)

DOBBS: Whatever -- whatever you wish.

(LAUGHTER)

BLITZER: Thank you, Lou.

DOBBS: Thanks, Wolf.

BLITZER: Still to come, the record-breaking hurricane season that sent Katrina crashing on to the Gulf Coast is about to end -- or is it?

And, later, D.C. gets a dose of the cute factor. The zoo's baby panda meets the press for the first time.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

Some New Orleans residents are venting their frustration at the pace of recovery there. It's three months to the day since Hurricane Katrina roared assure.

Our Betty Nguyen is joining us now from the CNN Center with more on this story -- Betty.

BETTY NGUYEN, CNN CORRESPONDENT: Wolf, New Orleans Mayor Ray Nagin held a town hall meeting today, giving residents a chance to voice their concerns about recovery issues. And the mayor got an earful.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I'm a New Orleans citizen, OK, who have a vested interest in the recovery of New Orleans. It's a hard thing to believe that the United States of America is spending nearly $1 billion per week in Iraq. And here in New Orleans, United States, we're being neglected.

Now, why do we have to beg and plead with our president, our Congressmen, our elected leaders to tell them that we need help, when it's on the media every day?

UNIDENTIFIED MALE: I want the assistance that I am supposed to get.

UNIDENTIFIED MALE: Yes, sir.

UNIDENTIFIED MALE: I haven't gotten it yet.

(APPLAUSE) UNIDENTIFIED MALE: And I have got to get out of the hotel room by the 3rd. I have been waiting on the trailer since October. And it hasn't come yet. The measurements haven't even been taken. And it's unfair.

Mr. Mayor, demand that public services call for help.

(END VIDEO CLIP)

NGUYEN: So, you see the anger and frustration. But there is some progress to report.

Mayor Nagin announced today the city is starting a free wireless network to help individuals and businesses tap into the Internet, despite power problems. And Nagin says the system started operating today in the central business district, along with the French Quarter. So, there are small steps forward -- Wolf.

BLITZER: All right, Betty, thank you very much.

And, believe it or not, there's another tropical storm in the Atlantic called Epsilon. It's not expected to come ashore anywhere, but it does make its appearance one day before the end of this year's record-breaking hurricane season.

Tom Foreman is here in THE SITUATION ROOM with more on this amazing season that...

TOM FOREMAN, CNN CORRESPONDENT: Nobody has...

BLITZER: ... we have just endured.

FOREMAN: Nobody has seen anything quite like this in this country, at least not on record that we know.

I want you to look very quickly, as we fly right into the map here. This is what we had in June. That's the first storms that came in. This is July. We're putting in all the tracks of all the storms this year. By August, we got hit by this, which included Katrina there in red, by September, October, by November. That is what we have been hit with this year, in terms of hurricanes.

They have never seen anything like it at NOAA. They're wanting to get more prediction capabilities now, more buoys out there to measure water temperature, more airplanes in the air, more satellite pictures, because they actually think this is part of a giant cycle we're going through, and we may be seeing this for the next 10 years. And while we're doing it, as you said, over here, the last part of the whole big season is Epsilon, sitting out there, going away, the end of the season, we hope, finally.

BLITZER: Good time for people to start buying those storm shutters and get ready...

FOREMAN: Seven months until the next one.

BLITZER: ... for next year.

Thanks very much. We will have a lot more from you on, 10:00 -- 10:00 p.m. tonight on "ANDERSON COOPER 360."

FOREMAN: Absolutely.

BLITZER: Tom Foreman, thank you.

Up next, defending Saddam Hussein -- should a former U.S. attorney general be helping Saddam Hussein prove he's innocent of the charges against him?

And meet the panda, so fascinating, so rare, and, yes, so expensive. Learn what it cost American zoos to house pandas and how much the Chinese government is pocketing.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: Let's go up to New York. Jack Cafferty is standing by with "The Cafferty File" -- Jack.

CAFFERTY: Thanks, Wolf.

Attorney General -- former U.S. Attorney General Ramsey Clark recently joined the defense team of Saddam Hussein. Clark said today he met with his client yesterday and that Saddam is in extremely good spirits.

Considering some of Clark's other clients, which have included cult leaders, terrorists and dictators all around the world, our question this hour is, should Ramsey Clark find another line of work?

Tiffany in Hollywood writes: "I think what Ramsey Clark is doing is just dandy. I believe in how the justice system in America should work. Considering we are trying to build a similar system of fairness in Iraq, I see nothing wrong with an American, who probably doesn't believe a thing Saddam says, who believes that someone should be presumed innocent until proven guilty."

Harry in Gallatin, Tennessee: "What the hell is up with Ramsey Clark? If Hitler could be brought back, Clark would be in the first line to defend Hitler as just a misunderstood Christian who grew up in an abusive home. Clark should go dig a hole in the Iraqi sand, bury himself, and stay there until hell freezes over."

Cindy in Tillamook, Oregon: "Come on, Jack. Normally, I'm right there with you. But on the Ramsey Clark question, you're wrong. When Saddam goes down, I want there to be no question he was given the fair treatment he denied to his countrymen. Ramsey Clark gives legitimacy to his trial and will make sure he gets a fair one."

Jorge in Boston: "I think it's shocking to have the former top law enforcer in the U.S. defending a man who had no respect for the law, plotted to assassinate a former U.S. president, and found two wars against this country. Clark says Saddam has been kept away from his family. I wonder if Saddam's prisoners got to see their families before or after they were tortured. It's great Ramsey Clark is in Baghdad. He should say there."

And Cornelius in Wilton, New Hampshire: "Like what Ramsey does or not, a society without a genuine gadfly is but one step away from being a police state" -- Wolf.

BLITZER: All right, Jack, I will see you in one hour...

CAFFERTY: You got it.

BLITZER: ... back here in THE SITUATION ROOM, 7:00 p.m. Eastern.

Up next, Washington's National Zoo debuts its multimillion baby. But some are wondering if the panda price tag is really worth it.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: Today, the new giant panda cub made its media debut at the Washington National Zoo.

Let's go to -- to the zoo.

Our Brian Todd is standing by -- Brian

BRIAN TODD, CNN CORRESPONDENT: Wolf with all that warm and fuzziness, there are growing questions among zoo officials here and elsewhere over whether these animals are worth the cost.

He cost $100,000 a month for the first six months of his life. His parents cost $10 million over 10 years. That's how much the National Zoo in Washington pays the Chinese government just to keep these creatures.

DENNIS KELLY, PRESIDENT & CEO, ZOO ATLANTA: The program, for its first 10 years, has been great for the pandas. But this expense is -- is too much for just four zoos to bear.

TODD: Dennis Kelly, CEO of Zoo Atlanta, crunched the numbers for the four U.S. zoos that keep giant pandas, Atlanta, Washington, San Diego and Memphis.

He says, last year, their revenues attributed to the giant pandas were $3.8 million -- the costs, $10.4 million, most of those costs paid directly to the Chinese government as fees for the pandas and for conservation programs to save the endangered species. The rest goes for food and maintenance, all paid for by the zoos.

And here is another thing China gets, the pandas back. All these animals, even the ones born in U.S. zoos, remain the property of the Chinese government. Those rules come under separate lease agreements these zoos have with China, agreements that also call for any profits made by the zoos to be put right back into conservation. Dennis Kelly is trying to make these deals a little more equitable.

KELLY: We want the costs that we pay for conservation in China to be much more in line with what we believe is being paid by other zoos outside the United States.

(END VIDEOTAPE)

TODD: Are -- are they worth it, in terms of popularity? Maybe not.

Zoo officials say visitorship does spike when a new panda arrives, but goes back to normal within about a year -- Wolf.

TODD: Brian Todd at the zoo, thanks very much. Good report.

Our Internet reporter, Abbi Tatton, has a little bit more on this story -- Abbi.

TATTON: Wolf, here is the National Zoo's panda cam, trained on the little fellow 24/7, so you can watch from home. And this might be the best view you get for a little while.

That's because the National Zoo released tickets to the public last week on its Web site, and they were all snapped up in the first two hours, that for the initial viewing session. Some of those tickets have actually turned up online. Looking at eBay.com, they're going for over $100 for a pair -- so, the little fellow very popular here in town -- Wolf.

BLITZER: Abbi, thanks very much.

And an update on that soccer game in Barcelona -- the joint Israeli-Palestinian team defeated by the all-star Barcelona team in Spain; 2-1, that's the final score. Barcelona wins, beats this unique Israeli-Palestinian peace team, as it's called.

I'm Wolf Blitzer in Washington.

Lou Dobbs standing by with more in New York -- Lou.

DOBBS: Thank you very much, Wolf.

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